Someone I know was doing this in the New Forest years ago. I don't know how it was worked at all I am afraid, but I do know that they were all painted very bright orange so that they showed up both to other road/track users and if they were dumped or stolen. I think they were for use along the tracks and not really on the road.

A few bike hire firms down here & they all seem buoyant. They all use lower to mid price range bikes from one manufacturer for ease of maintenance. & sell them on after two or three seasons. They no doubt get a better deal buying ten or twenty bikes a year from one place & make nearly as much when they sell them on. No Idea how much insurance for such a business would be.

Businesses are usually advised to have public liability insurance because otherwise a large claim could bankrupt them and their partners/owners/directors. You need to decide with your insurance company what cover you need. I would have thought that you will need to decide where the bikes can be used, eg cycle tracks into town/round a national park, side roads only, bridle ways only. I would think for normal road use the insurance would be high as there was a real risk of one of the riders being hurt.